Coinbase plans on launching a new crypto derivatives product aimed at retail traders. Coinbase Derivatives Exchange, formerly FairX, will launch its product on June 27th: Nano Bitcoin Futures (BIT). This is the first product of its kind and would provide retail traders with hedging options.
Coinbase is awaiting regulatory approval on its own futures commission merchant license. In a statement sent to CoinDesk, Coinbase said, “The crypto derivatives market represents $3T in volume worldwide and we believe that additional product development and accessibility will unlock significant growth.” The statement also noted that “at 1/100th of the size of a Bitcoin, it requires less upfront capital than traditional futures products and creates a real opportunity for significant expansion of retail participation in U.S. regulated crypto futures markets.”
Crypto derivatives are something of a hot-button issue, particularly against the backdrop of the crypto winter. Some regulators, including Dutch regulator Paul-Willem van Gerwen, head of Capital Markets and Transparency Supervision at the Dutch Authority for Financial Markets (AFM) see these products as risky, saying last month that he wanted to ban them from retail use. “I maintain that the trade in crypto derivatives should be restricted to wholesale trade.”
Coinbase purchased FairX earlier this year with the goal of launching retail derivatives products. FairX launched its futures exchange platform back in 2021.
The stock has reacted well, going up following the announcement. Derivatives trading tends to be more robust than spot trading. Binance, for example, saw $52.5 billion in derivatives volume in the 24 hours through early Friday afternoon compared to just $12.7 in the spot, according to Barron’s.
As the crypto space continues to rebound after a brutal stretch, investors have the chance to capitalize on the recovery. The Invesco Alerian Galaxy Crypto Economy ETF (SATO) has Coinbase as one of its biggest holdings and stands to benefit from the company’s launch of this new platform.
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